Frozen foods remain a challenge for Heinz

by Keith Nunes
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PITTSBURGH – With a product portfolio that features such well-known brands as Weight Watchers Smart Ones, Ore-Ida and T.G.I. Friday’s, the H.J. Heinz Co. is working to improve its position in the North American frozen food category.

“The category over the last five years has lost 20 million cases, about a third of the total category volume,” said William R. Johnson, chairman, president and chief executive officer. “It's lost $500 million in sales.
“Within that period, our overall business as we define it is up 2.5 to 3 share points. Currently, what we are seeing is very strong performance in our breakfast business, good performance in some of our sides in terms of the snacks. In our base entree business, we are not promoting as aggressively as maybe we could, and that is a decision we have made. So the focus has really been in frozen on getting Ore-Ida and our snacks business growing, which we did very successfully in the second quarter.”

Mr. Johnson comments came Nov. 20 as he discussed Heinz’s financial results for the second quarter of fiscal 2013 with securities analysts.

He added the bigger issue he sees, “Continues to be the nutritional category, where the industry has lost about a third of its sales over the last five years. So rather than chasing volume in a category that is still not sure where it's going, we are playing on innovation. We are doing a lot of good things, particularly in breakfast, which is the fastest-growing day-part in the freezer case, and really focusing our other efforts on Ore-Ida and our frozen snacks businesses, which are performing quite well.”

Going forward, Mr. Johnson said Heinz will invest in products the company views as having growth potential.

“We are monitoring the market and trying to be as balanced and nuanced as we can in terms of how we prioritize our investment dollars,” he said. “Right now, I am getting a significant positive return on Ore-Ida. I am seeing a good response in frozen snacks. And I am seeing a terrific growth upside in ketchup. So as a consequence of that, we will put the investments behind where we are seeing the growth.

“So as I said, breakfast is doing well. You continue to see us focus on breakfast. We've got a lot of new activity coming during the season in terms of innovation and some new products.

“And then we've got some interesting things over the longer term that you will see over the next six to 12 months in Smart Ones. I certainly don't want to imply that we are walking away from the business because we are not. It is critically important to us. But I think you can read into that that the dollars we are allocating for investment in the freezer case we are going to put first where we are getting our best return, which in this case right now is Ore-Ida and snacks. And we will manage the Smart Ones business the best way we can.”

During the second quarter ended Oct. 28, Heinz’s North American Consumer Products segment had operating income of $190,341,000, down 6% from $201,927,000 during the same quarter of the previous year. Sales for the segment were $794,957,000, up slightly from $794,271,000.

The entire company had income of $289,444,000 during the quarter, equal to 90c per share on the common stock, which compared with income of $237,009,000, or 74c per share, during the same quarter of the previous year. Sales for the quarter were $2,827,210,000, up slightly from $2,813,964,000.

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